Semiconductor industry processes node gives highest margins and investments

  • Industry News
  • Jun 29,22
IESA is the premier trade body committed to the development of a vibrant Indian Semiconductor and Electronics System Design and Manufacturing (ESDM) ecosystem and evangelizing the dream of establishing “Brand India” that is recognized worldwide as a go-to destination for electronic products. In a summary, Krishna Moorthy, CEO & President of IESA, discusses the issue of a lack of semiconductors and makes some recommendations for a solution.
Semiconductor industry processes node gives highest margins and investments

How close or far are we from solving the semiconductor shortage issue?
The shortage is expected to start to ease by the end of 2022 and progressively become normal by the end of 2023. We are already seeing normalcy in many areas like logic parts, sensors, RF products etc. And again, this depends on which vertical you are analysing the shortage. For example, the consumer electronics vertical may see the shortage reduce faster than say automotive. The reason is quite easy to understand. The Semiconductor industry looks at which process node gives them the highest margins and directs their new investments there. The ones like strategic electronics and automotive demanding high reliability parts tend to remain with an older process technology node unless a change is unavoidable. The cost of redesigning a High Rel system is prohibitively high for many Tier 1 and OEM’s.

In December 2021, the government of India announced the PLI Scheme for semiconductors. Will PLI provide a conducive environment for semiconductor manufacturing in India? Are you seeing the effect of this scheme on ground?
IESA is India's ESDM knowledge partner providing the ‘Thought & Act’ leadership to this industry. We in the ESDM industry believe that the Dec 2021 Policy announcements for accelerating semiconductor manufacturing and related eco system development will be a game changer for the government. Setting up a Silicon Fab is expensive and requires strong government support for a long period of time. Fabs all over the world have come up and sustained itself through this model only. The present government has understood the strategic importance of semiconductor and its long-standing impact on India's economy. The attractive PLI schemes announced by the Government of India are the result of this deeper understanding. In developed countries Electronics contribute about 8-10 % of the Nation’s GDP. In India it is now about 2.5%. If the Indian ESDM industry can increase its share to say 8% of the GDP, it will have a huge multiplier effect. The Dec 2021 policy by GoI will get the ESDM industry moving in this direction. We are seeing a lot of momentum in many states who are vying for a piece of the pie. The initial delays are expected but once the ground-breaking happens, then India will see many 'designed and made in India' products in the ESDM space.

How do you analyse the performance of the Electronics System Design and Manufacturing (ESDM) industry in recent years?
The ESDM industry has shown very good and healthy growth in the last few years. The Start-ups in telecom have during the last one year seen buyers with attractive valuation and the next wave of System and Semi Start-ups have shown good progress so far. Without resorting to reeling out numbers and data, let me say this. Our young engineers have learnt to take far more risks that my generation could have even imagined it could. This augurs well for the ESDM industry. It is not only risk taking but showing courage to walk into more advanced domains like 5G, EV, AI/ML, Exascale computing etc. To the best of my knowledge there are about 2 dozen companies out there in systems and semiconductors who could announce products and solutions for the world in 24-36 months.

What are key challenges before companies operating in the electronic hardware and ESDM industry?
Today the ESDM manufacturing industry is trying to emulate what the SW industry and design industry has done. That is, to do electronics manufacturing as a service. Some of them have evolved into design and mfg. as a service. Their challenges are both on the input side and output sides. On the input side where components have to be imported, the recent cycle time increase has resulted in the cost of inventory going up a lot. Many companies who are trying to compete with China are facing the heat in this situation where they are not able to leverage the cost arbitrage India offers otherwise. On the output side the shipping costs and the rather underdeveloped infrastructure in India is making the movement of finished goods and export a deeper than obvious challenge. Even smaller countries like Vietnam and Malaysia are able to manage this better than India.

But on the other hand, the ESDM design industry is globally reposing its faith in India and Indian talent. The movement up in value chain for the design teams in India has never been so good more so post covid. Yes, this has posed a severe talent shortage challenge and government is working overtime with people like IESA to mitigate this near term and long term.

How big is the concern around surging raw material prices?
This in my opinion is a demand supply issue in the near term induced by a V like recovery of Indian economy as well as the Ukrainian war triggered situation on the supply chain of many inputs’ raw materials. Add to that the China related geo political issues and the picture looks difficult today. And the steep rise in oil prices and resultant energy costs has only added to the already grim situation. But this may be a passing phase. I believe the fundamentals of the Indian economy are good and the credit lines are managed reasonably well by the government so far. So, yes in the very short term there will be pressure on corporate results for a qtr. or two but will ease after that since the war has to end sometime soon. The good thing is that the demand is still resilient and is not showing any signs of reducing.

But what worries me more now, is the China’s stated position on Taiwan 2 days ago which implies a supply chain doomsday. Supply chain disruptions cannot be wished away even today but if the sea routes that control 40% of global trade is impacted which in turn could jeopardize >60% of world’s mfg. regions, the manifold impact on supply chain cannot be foretold. Just as Russia - Ukraine tension being in the air since middle of last decade but war happened now, we have to be prepared for more such upheavals. Ignoring them is not an option.

Another area of concern has been raising imports of electronic components. What needs to be done to reduce imports?
There are no short-term solutions here. India has to start manufacturing electronics components, both passive and active parts. In passives we have made some decent progress but even there in areas like Solid Tantalum capacitors, SS relays etc are still up there for more investment and play in the global marketplace. In the active semiconductor space, the Dec 2021 policy is expected to bring investments to set up fab in India at the earliest. There is no other solution to reduce imports. We have to make them here as soon as possible.

What more do you expect from the Union & State Governments to take the electronic hardware industry to the next level?
I think the Central government and many of the state governments have done a lot to support the electronics HW industry in terms of policy support and incentives. It is for the industry now to respond to these initiatives. However, the key is for the government to maintain the policy stable for long enough and be ready to tweak it as needed periodically. The steps like EDF did not yield the desired results because they were static in nature. The other thing the industry expects from the government is very low friction and human touch in input and output flows like customs etc. The Government needs to work with the industry on the principle of trust rather than on suspicion. For example, why do we need two approvals for the CHIMPS certificate for the import of electronic components? The other area where the government can pay deeper attention is serious skill development. The Indian work force is not trained well to absorb Industry 4.0 and beyond technology in manufacturing and factory automation. This needs to happen earnestly at the diploma/ITI level. IESA is working on a long-term scalable plan with the governments on this.

Automation is gaining traction across industries. What kinds of opportunities will this trend present to IESA members?
Today automation is as ubiquitous as you can imagine and desire. The adoption of the internet and computers across the world took a decade plus but with that in place now; automation is becoming all pervasive and fast in adoption. We have in our hands now the ability to get some of the mundane activities like getting the monthly utility bills paid or getting the washing machine turned on at a given point of time controlled remotely. Industrial and home automation are two segments that are fast growing and its impact on agriculture, health care etc are happening right in front of our eyes. The delivery of remote diagnosis and remote health care delivery by doctors is not fiction anymore. IESA members have immense opportunities in IOT devices and solutions and its adjacent areas like data analytics, data security etc.

Sustainability is a buzzword today. How is the electronic hardware industry adopting the sustainability trend?
The only way to achieve sustainability for the industry is to become a global player. No industry or company within that can plan to be successful with subsidies and catering to a limited local market. So the answer is simple and direct. Scale up and be a global player. Compete on quality, technology, innovation and cost. Tow lessons world learnt from Japan and China are these.

Japan never compromised quality for anything else and we get niche & Innovative technologies even today from there at an attractive price point. China taught us the lesson on economies of scale and how cost can be driven lower and lower.

Would you like to give any message to the industry?
ESDM is the industry for this decade. The more you innovate the more it rewards you. The opportunities are abundant and there is no better time than now. But let me also say this, more so to the leadership. The world is in a deep messy flux. The Russia – Ukraine conflicts, the export imbroglio by US to China, rising energy prices due to record oil prices, economists are speaking of stagflation sooner than later, persistent virus threats, unprecedented climate changes and resultant catastrophes, and the most unwanted but looming food crisis in many parts of the world. Add to that the China’s stated position on Taiwan 2 days ago only gives a perception of doomsday and its impact on supply chain is to be assumed and be prepared for. Talent shortage hurts Start-ups like never before. The post covid inflation across the globe is making credits costly and hard to get. These are the known elephants in the room. There may be a few that are unknown as well today but ignoring either of them will be at the peril of the enterprises you lead and manage.

This is not to say that awareness is not there and most leaders and captains of our industry know that. But how can and should they steer enterprises out of the storm must be keeping them awake at night. The next couple of decades could potentially move towards localisation and fragile economies built on remote services as a business model will tend to implode unless heavy investments in disruptive innovation is made by companies and the business leaders. Opportunities exist like never before but not on a platter anymore and every company and industry leader will have to sweat for it. Business patterns will repeat themselves but with minor and subtle changes and the leadership has to catch them as they appear. And always be prepared for the left hook in the boxing ring while you are watching for the right jab.

Related Stories

Automation & Robotics
BARC collaborates with Intech Additive to make 3D printed metal components

BARC collaborates with Intech Additive to make 3D printed metal components

Given their size and complexities, manufacturing miniature components through conventional methods pose a challenge. Therefore, metal 3D printing technology becomes an ideal ally in such scenarios f..

Read more
Other Industrial Products
Enerpac enhances ETR Series trolleys with higher capacity

Enerpac enhances ETR Series trolleys with higher capacity

Enerpac has enhanced the ETR-Series Trolley System with higher capacity trolleys and swivel plates to accommodate header beams and other lifting systems

Read more

Related Products

Bagging System - Manual

INDUSTRIAL AUTOMATION & TECHNOLOGY CONSULTANCY

Alligator Automations provides a wide range of manual bagging systems Read more

Request a Quote

Shock Absorber

INDUSTRIAL AUTOMATION & TECHNOLOGY CONSULTANCY

Stellent Technologies Pvt Ltd offers a wide range of hydraulic shock absorber.

Read more

Request a Quote

Autonomous Measuring Cells With Integrated Handling Robot

INDUSTRIAL AUTOMATION & TECHNOLOGY CONSULTANCY

Blum-Novotest Measuring & Testing Technology Pvt Ltd offers a wide range of autonomous measuring cells with integrated handling robot – BMK5. Read more

Request a Quote

Hi There!

Now get regular updates from IPF Magazine on WhatsApp!

Click on link below, message us with a simple hi, and SAVE our number

You will have subscribed to our Industrial News on Whatsapp! Enjoy

+91 84228 74016

Reach out to us

Call us at +91 8108603000 or

Schedule a Call Back